Singapore—Comments that the payout period until the age 95 is too long has caused a review of the Retirement Sum Scheme (RSS) payout rules for older Singaporeans by the Ministry of Manpower (MOM) and the Central Provident Fund (CPF) Board.
The review will be accomplished by the end of this year, MOM said in a written response to a question in parliament from Member of Parliament (MP) for West Coast GRC Foo Mee Har last Monday, October 7.
Ms Foo asked if the CPF Board would consider re-thinking the length of the payout so that CPF members could receive higher amounts in their payouts.
The RSS is for CPF members whose birth dates fall before 1958, who receive their payout at age 65. They receive these payouts every month for 20 years, or unroll the depletion of their Retirement Account.
According to MOM, due to the increase in life expectancy, there is now a higher risk that members will live longer than their payouts.
“In 2018, more than half of Singapore residents aged 65 were expected to live beyond age 85, and about one in five were expected to live past age 95,” MOM said.
Because of this, the Government launched Extra Interest and Additional Extra Interest initiatives in 2008 and 2016, and now one extra percentage point of interest per year is paid on the first S$60,000 of a member’s combined balances from their Ordinary Account, Special Account, Medisave Account and Retirement Account.
CPF members 55 and older get another one percentage point of interest per year on the first S$30,000 of combined balances.
This would, as MOM says, “reduces the risk of members running out of savings in old age” and allows the payout length tho extend over 20 years.
MOM also noted, “Even with the extension, the CPF Board ensures that RSS payouts do not stretch beyond age 95.”
But some have commented that 95 years is too long, and thus, MOM said that the review would serve to “consider how to address this concern”.
With concerns over an aging society, CPF has been much in the news this year. In June, a policy brief from the Institute of Policy Studies (IPS) showed how increasing the Central Provident Fund (CPF) contribution rates for older workers to put them at the same level of those of younger workers would be helpful in helping them save between S$31,000 and S$145,000 more by the time their retirement period comes around.
The brief from IPS said that, depending on the income bracket, a 55-year-old employee would be able to put together this amount in savings in his or her Ordinary and Special accounts, if the total rate of contribution is raised to 37 percent until the employee reaches the age of 65.
At present, this CPF contribution rate of 37 percent is only given to employees until they are 55 years of age. As the worker grows older, the rate gets smaller. From the ages of 55 to 60, the rate goes down to 26 percent, and for those older than 65, the rate is 12.5 percent.
Increasing CPF contribution rates for older workers may also give them an incentive to stay as part of the workforce, and younger workers all end up with greater savings during their years of employment, said Damien Huang, IPS research associate, and senior research fellow Christopher Gee, in the policy brief./ TISG